property on jenga blocks

What’s going on in Australia’s residential property market

Despite increasing lockdowns, jaw-dropping property sales are still being recorded in the Sydney, Melbourne and Canberra markets. Economists have pointed out that this demand is driven by an element of FOMO, a desire for sea-change or tree-change, record-low mortgage rates, home buyer incentives, economic and jobs recovery.

Strong property sales in all markets 

Adelaide has the nation’s best clearance rate with 85 per cent of houses sold for a median price of $810,000, followed by Sydney at 83 per cent last week with almost two-thirds of properties sold before the scheduled auction day as agents pushed to quickly close transactions.

Canberra went into lockdown on Friday but auction clearance rates were as high as 82 per cent. Brisbane with a median house price at $915,000 had a clearance rate of 153 homes of 75 per cent. 

In Melbourne, the rate is much lower at 63 per cent, pulled back by a high withdrawal rate of 31 per cent. However there were some “ferocious bidding” for homes on large blocks of land in premium suburbs including a five-bedroom home in Brighton bought after 2 inspections for $9.7 million and the $6.6 million sale of 306 Glenferrie Road, Malvern. 

You must be wondering with prices this high, owning a block of land is no walk in the park. For the majority of people, the cold hard reality is that investing in a home would require their whole family and friends to jump on board. So who can possibly keep up? 

Strong demand for elite homes and apartments

As you might have expected, the “ultra-high net worth” buyers are itching to hop in the luxury property market. In a way, the supply shortages make properties even more attractive to investors, owner-occupier expats and freshly minted multi-millionaire tech entrepreneurs keeping prices buoyant. 

Demand in the $10 million to $20 million bracket is “unprecedented”, said Antoinette Nido, who sells top-end property in Melbourne’s Toorak for RT Edgar. The wealthy “downsizers” are after gobsmackingly lavish homes that include a garage for their car collections, large living areas, wine cellars, theatres for the grandchildren and lock-and-leave security without a body corporate. 

Sydney’s top-end buyers are looking for dreamy as heck homes in premium suburbs with harbour views, or 300 to 400 square metre apartments with good car parking and water views in a boutique block. 

They’re “in no hurry and won’t move until the right place comes along” said Martin Schiller, a sales agent for Savills Australia specialising in Sydney’s most expensive multi-million dollar postcodes. 

COVID-19 cloud

Spring season, starting in 2 weeks and running through to Christmas, normally is the busiest time for residential property markets across the country when a surge in supply matches with an increase in demand. 

But this time around, there’s a lot of uncertainty due to the growing restrictions on inspections, on-site auctions and travel. 

According to CoreLogic, residential sales during the three months to the end of July were about 170,000 sales (more than 53 per cent higher during the previous five years) but the number of new listings slipped to around 120,000. This is the lowest ratio of listings to sales for a decade. In other words, prices won’t be steady this spring. 

Eliza Owen, CoreLogic’s head of research says new listings have tumbled due to COVID lockdowns, with new stock in sydney falling more than 17 per cent in the past 4 weeks. 

“Sellers don’t see it as a good time,” Owen says. “Buyer activity also declines during lockdown because social distancing restrictions make it harder to inspect and purchase properties. People are also worried about committing when jobs and income are uncertain.”

If lockdowns persist in major markets, the attitude of banks to mortgage repayment deferrals would be critical to the property market, same as last year. Up till now, most major banks said they will consider repayment relief for pandemic-affected customers.